There can be a lot of mistakes people make when buying a franchise, so let’s talk today about the four biggest ones.
Mistake #1
The first big mistake is they get seduced by the opportunity, and buy prematurely. They’ve heard all the great things the franchisor does for the franchisee, but have not talked to enough existing franchisees to understand how effective those things are, what work the franchisee has to do, and just how much work is required by the franchisee. They make assumptions about the amount of support the franchisor provides, instead of doing enough research to understand where the franchisor’s support is strong, and where there might be gaps.
Mistake #2
The second big mistake is that they’re undercapitalized. They use most of the money they have to get the business open and run it for a few months, but they underestimate the amount of additional working capital that the business will need until it gets to consistent break-even… and they don’t have the cash reserves to cover that extra working capital. Many businesses take longer than 6 to 9 months to achieve break even, so you have to understand how much additional money that really takes.
Mistake #3
The third big mistake is they assume that they just have to open their doors, and the franchisor’s brand will bring them customers. I tell all my clients that it is NEVER the franchisor’s job to bring the franchisee customers! Instead, it’s the franchisor’s job to bring proven systems and processes to the franchisee, part of which is how to get customers, but it’s the franchisee’s job to execute those processes in their own markets. You can have the best franchise brand in the world, but if you don’t execute the marketing strategies and train your staff to deliver the customer experience required at or above expectation level, customers will come in a two or three times… but they may never come back, and will likely leave poisonous reviews on their way out!
Mistake #4
The fourth big mistake is that they don’t build a detailed business plan. They might have a financial spreadsheet for the first two to three years, which makes them rich on paper, but they don’t have an operational plan of how they’re going to execute the work it takes to achieve the financial results they’re projecting.
I’ve helped hundreds of people achieve success in franchise ownership, and almost all my clients have told me it’s harder than they expected, and that it took them longer than expected… and they did all of the in-depth research! Before you buy a franchise, you must be able to answer WHY that business is the right one for you… but more importantly, you must be able to answer: This is how I’m going to execute the business model for the first two years to achieve my financial goals… broken down into specific activities and timelines.
Let me help you avoid these critical mistakes and find a business that leverages your skills and passions – let’s start with a discussion. Book a call now.
Originally posted on LinkedIn
